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If you have a job that requires you to travel a lot by car, you should be deducting your business expenses to prevent overpaying your taxes. These expenses include both “common operating expenses” for the self-employed as well as vehicle expenses—which can be a great way to lower your tax burden.

To deduct the costs associated with the use of your vehicle, you can use either the Standard Mileage method or Actual Expenses method. You won’t be able to take both deductions, so you need to evaluate which method provides the bigger tax benefit for you. To help with the decision, we’ve outlined the basics of each method and highlighted two examples that illustrate the differences among each.

Standard Mileage
The simplest method for calculating your vehicle-related deductions is to use the standard mileage deduction. For tax year 2016, this is $0.54 per mile. In 2017 it will be $0.535 per mile.

You are eligible to count any miles you drive for business-related purposes. For example, if you drive for Uber of Lyft, you can deduct any miles related to your ridesharing services, including the miles you drive looking for passengers to pick up (even if there are no passengers in your car). However, if you run personal errands in between taking customers, you can’t deduct that mileage.

In order to claim this deduction, you need to keep a detailed mileage log. Your mileage log should include the date, start time and end time, the activity involved, and the beginning and ending odometer readings. Mileage and expense-tracking tools can help you maximize this mileage amount because they are the most comprehensive.

Choosing the Standard Mileage deduction means that you cannot deduct any other expenses related to your car. If you’d prefer to deduct other items, you need to use the Actual Expenses method.

Actual Expenses
When deducting actual expenses, you can only deduct the portion associated with your self-employed work (e.g. if half of your $100 cell-phone bill is used for work, deduct only $50).

Depreciation: When you use the Actual Expenses method, you can use a depreciation table to deduct a portion of this on your taxes. Just make sure the deduction is in proportion to your business driving time.

Registration: You can’t deduct your title, licensing and registration fees in all states. However, if your car registration cost is based on a particular formula, you might be able to deduct a portion of the cost. Check with a knowledgeable tax professional to determine whether this is an option for you.

Remember to save all of your receipts and keep good records so that you have the information you need to make a decision.

Example: Part-Time Rideshare Driver
part-time-rideshare-driver-expenses
Assume you drove 10,000 miles in the year 2016, and 5,000 of those miles were for business. Here’s how you would break down your deductions using the Actual Expenses method:

Gas: $1,000

Insurance: $1,500

Repairs: $400

Lease Payments: $6,000

Oil: $100

Washes: $500

These figures total to $9,500 in car-related expenses. Since you used your car for business purposes 50% of the time, you would multiply your total expenses by 50% to get your actual deduction, which comes out to $4,750.

If you use these same figures to calculate your deductions using the Standard Mileage method, you would multiply your business mileage (5,000 miles) by the standard mileage rate (54 cents per mile), which comes out to $2,700.

As you can see, in this example, you’ll save the most on taxes by using the Actual Expenses method for the deduction.

Example: Full-Time Rideshare Driver
fulltime-rideshare-driver-expenses
Now, assume you drove 40,000 miles in the year 2016, and 30,000 of those miles were for business. Here’s how the Actual Expenses method would work in this instance:

Gas: $4,000

Depreciation: $3,160

Insurance: $1,500

Repairs: $1,200

Oil: $190

Tires: $500

Washes: $750If you add these up, your total expenses come out to $11,300. Since you used your car for business 75% of the time, you would multiply your total expenses by 75% to get your actual deduction, which comes out to $8,475.

If you use the Standard Method with these same numbers, you would multiply the number of miles driven for business (30,000) by the standard mileage rate (54 cents per mile), which comes out to $16,200.

In this particular example, you’ll save the most on taxes by using the Standard Mileage method.

As you can see, the method you choose to calculate your car-related expenses can translate to either saving on taxes or adding to your tax burden. Accounting software like QuickBooks Self-Employed can help you keep track of mileage, automate your deductions and calculate both methods, allowing you to decide which method works best for you. And an accountant can also help if you’re having trouble with the decision. For more tax-time tips, see our complete guide to taxes for the self-employed, as well as our guide to deductions and expenses.

This article is intended to provide you with general information; it does not constitute any type of tax advice. The views expressed in this article are those of the author alone, and do not represent the opinions of Lyft, Uber or any employee thereof. For recommendations related to your overall financial and tax status, contact Hampton Roads Accounting today.

This week, I spent some time with my lawn care provider, and we discussed how his business was going. He said that business was good, but slowing. In Virginia, grass is growing slower as we enter the fall and winter. When I asked how he was marketing to his during the winter, he said he hadn’t thought about it.

Here was a huge revenue opportunity he was missing.

We talked about the need to stay in contact with his customers, and offer additional services to keep his revenue stream strong during the winter. We also discussed building a calendar for his marketing efforts, based on the needs of his customers.

Here is an example of what we came up with. These are complimentary services his customers will need, in addition to grass cutting:

November and December

Remove storm debris

Remove leaves

Dormant pruning

Trim all shrubbery (in preparation for holiday events)

Set up Christmas décor (this is both lighting and providing wreaths)

Snow/ice removal / salt sidewalks and driveways

January / February

Take down Christmas décor

Remove storm debris

Remove Christmas trees

Dormant pruning

Snow/ice removal / salt sidewalks and driveways

March / April

Snow/ice removal / salt sidewalks and driveways

Aeration, fertilization

Remove storm debris

Schedule mulching appointments for May

There are two important things to keep in mind when building a marketing plan:

It is much more expensive to get new customers than it is to keep existing ones. By providing services to your customers throughout the year, you won’t need to re-introduce yourself in the spring, and your customer churn will be much lower.

To be different from your competition, you have to do something different. In the spring, my front door will have several door hangers from lawn care companies. Honestly, I won’t even look at them. ‘My lawn guy’, who has been taking care of my needs during the winter, will be my ONLY choice for the rest of the year. However, I might look at those door hangers if I feel my lawn care provider has forgotten about me.

Think about what additional services your customers need that you can provide during your slow season, and both you and your customers will benefit.

We are entering the holiday season – Thanksgiving, Christmas, and New Year’s. Homes will be busy with holiday shopping, entertaining family and friends, and lots of holiday decorations. Before you know it, it will be time to file your 2017 taxes.

Take a few moments now to collect the tax-related paperwork that reflect the special events that happened in your life this year, and put it safely away for January.

Here are some events to consider, and some items to collect now:

Did you buy or sell a home? A copy of your mortgage and closing documents

Did you have any casualty, theft or loss? A copy of all paperwork relating to the event

Did you get married? Social security cards

Did you get divorced or separated? A copy of the divorce decree or separation agreement, showing child support, alimony, and property settlement arrangements

Did you have any medical expenses? A copy of ALL unreimbursed receipts from any medical provider, pharmacy, and insurance provider

Did you move? Old and new address, and receipts for ALL expenses related to the move

Did you have a baby? Date of Birth, and Social Security Number (if you have one)

Did you start a new job? Receipts related to a new job search, or anything related to you getting the new job.

Did you or someone in your family attend school (beyond high school)? Receipts for all school related expenses including tuition, room and board, books, and other items

Did you start a new business? This list is VERY long. I recommend you visit our website and review the July 2017 Client Newsletter, which lists much of the paperwork needed to record new business expenses.

Did you donate to a charity/non-profit/religious organization? A copy of your receipt is needed.

Did you pay for daycare? You will need either the name and SSN of the person (if an individual), or the name, address, and EIN or the business or organization

Did you pay Personal Property Tax? A copy of the receipt

A copy of your 2016 Federal and State tax returns should be kept with your 2017 paperwork.

A copy of ANY other paperwork you feel is important, or you have questions about (“I wonder if this is deductible?”). It is far better to have a copy of an item you have a question about, than to later learn you need it but can’t find it.

A simple filing system to keep everything organized is to file:

Family (birth/marriage/divorce/daycare)

Home (sale/purchase/casualty/theft/loss)

Moving or job related

Medical

Business

Other/Miscellaneous

My BEST recommendation is – keep ALL of your receipts. As you can see from the brief list above, many normal events in your life have a tax implication. If you have a question about an expense, keep a receipt, and ask us when we prepare your tax returns.rns.

Why do employees want to work for you? More importantly, why do they want to stay? If you have as little as one employee, you should be thinking about benefits. We offer a variety of benefits with our Gusto payroll system, but one additional benefit you can offer, at LITTLE TO NO COST to the business, is Supplemental Employee Benefits. Let’s take a look at what you can do for your employees:

Employers who offer supplemental benefits provide a valuable financial safety net to their employees. Offering these products allows you to enhance your current benefit package at little to no cost to the business, and gives your employees a wide array of options to choose from to help protect their financial security. It takes the burden off of the employer to make difficult decisions on whether or not to financially assist employees through a difficult financial time, caused by injury or illness.
Offering supplemental benefits can help reduce worker’s compensation experience and assist you in attracting and retaining quality employees. There can also be some payroll tax savings when combined with a Section 125 plan. When employers make supplemental coverages available at the workplace, employees respond favorably toward their employer. It is truly a win-win situation for both parties.

Benefit to Employees

Supplemental benefits provide cash directly to your employees when an unforeseen accident or illness strikes an employee or one of their family members. Payments can be used to pay non-medical expenses in addition to deductibles and co-pays. Benefits are payable over and above any other insurance they may have, including group medical. (No coordination of benefits required). These cash payments assist your employees in dealing with out-of-pocket costs and loss of income. Since most employees today live on virtually 100% of their paycheck, any unexpected, sudden reduction in income can have serious consequences to their lifestyle. Even with disability coverage, families can experience a severe hardship when they are unable to work due to an injury or illness. Many times, it is a family member who is injured or sick, and this is not covered under the employee’s disability plan. Having a menu of supplemental benefits to choose from allows you to customize your benefit package to meet your employee’s family’s specific needs and concerns.

Hampton Roads Accounting Clients have a special agent standing by to discuss your particular needs and see how Supplemental Employee Benefits can be offered in your company.

To get started, or to just learn more, call Tammy at 757-499-1880 and tell her you were referred by Hampton Roads Accounting.

When starting your new business, you are probably not thinking about your tax return at the end of the year. You have a whirlwind of activity and things to focus on – getting proper licenses, setting up a business location, getting supplies and equipment, growing your client list, hiring employees, and so many other things.

When I sit down with a new business client, we discuss all the things they had to do to get their business started, because most of them are items that are deductible at the end of the year.

Here is an exercise you can do to improve the deductions you can claim at the end of the year. All you need is a notebook, a large manila envelope, a cup of coffee, and about an hour of quiet, undisturbed time. If your business is a partnership (husband and wife, or two friends), it would be helpful for you to do this together.

Just answer the following questions:

Do you have a home office? This is a space dedicated only for the use of your business, the main place where you work on your business.

Write down the total square footage of your home, and the total square footage of your office.

Look around the office and list EVERYTHING you had to purchase to start your business. Desks, computers, a copier, office supplies, a new phone line, Internet connection, security system, etc.

Did you have to do anything to your home office room to get it ready for business? Did you paint, install shelves, put in a new carpet or light fixtures?

Do you regularly meet clients at your home office?

Compile a list of ALL home expenses. This could include mortgage payments, property taxes, natural gas, electric, telephone, Internet, water/sewer, parking (if you have to pay for parking), landscaping/lawn care, homeowner association fees, as well as any and all repairs to the home.

Do you have a business location outside the home? In other words, do you run your business from a commercial building? This could be anything from a retail space in a shopping mall, to a rented office, to a storage unit. If so, answer the questions above, but for your commercial location.

Did you use any of your personal assets for the business? One example of this is a computer purchased for your personal use at home, but you now use it for the business. Another example would be a personally purchased pressure washer, lawn mower, or other tools that you now use for the business. If so, write down when you purchased them, the cost, and their approximate value the day you started using them for the business.

Do you sometimes go to Office Max or Staples to get something for your business, and pay for it with your personal funds? Record these purchases, and keep track of the receipts.

Do you use a vehicle for your business? This could be your own vehicle, or a vehicle used only for the business. If so, you need to track mileage. You basically have two options:

Keep a notebook in the vehicle, and write down your mileage and the purpose for each trip

Use a mileage tracking app like MileIQ to automatically track your mileage. I strongly recommend using a mileage tracking app to make this simple.

Do you use your personal money to:

Take clients out to lunch?

Pay for a company holiday party or barbecue?Keep the receipts – these expenses may be deductible.

Do you pay self-employed health insurance? You may be able to deduct 70% of your health insurance premiums.

Do you use your personal cell phone for business (this includes calls, texts, and/or Internet use)? If so, keep a copy of your phone records and highlight the business related calls/texts.

Do you purchase fuel for your equipment? This includes lawn mowers and other landscaping equipment, pressure washers, carpet extraction equipment and related items? If so, keeping your receipts might allow you to take a credit on the tax paid on fuel. (Note: as of 2017, the credit is over 18 cents/gallon.)

Did you buy any equipment? For many small businesses, this can be a large expense. A new landscaper might need a truck (or two), a trailer (or two), a lawn mower (or several), trimmers, edgers, etc. This is a big one, and is related to the home/business office questions. Be sure to document every piece of equipment you purchased. Some can be expensed; some can be depreciated. The documentation you have may help significantly lower your tax liability.

These are only a few deductions that overlooked by new business owners. If you have not started, I strongly suggest sitting down and writing down your answers to these questions, then give me a call. Let us help you get your tax bill as low as possible.

Marketing is getting the right message in front of the right prospect using the right medium. It is also about taking advantage of an opportunity to promote your business.
Let me share a recent experience we can all learn from:

February 9 was National Pizza Day. I learned about it from a friend who was browsing social media. Well, I love pizza, so I decided to double check. Sure enough, it was a ‘real’ event. I looked online at the local pizza restaurants, and some of them were having specials. A moment later, I told my wife we were going out.

Throughout the day, I shared National Pizza Day with a few friends, who told others. Many were planning to go out for pizza to celebrate. I was a little excited, thinking about what kind of pizza I wanted to order. When my wife came home from work, she was excited about going too. Because really, who doesn’t love pizza?

Well, that’s where the fun ended. When we arrived at the restaurant, we were seriously disappointed. No signs, no celebration, nothing to make it a festive, fun event. The restaurant was understaffed, and the wait time was so bad that after 20 minutes, we got up to leave before our order was taken. The owner came over, apologized, and took our orders. The food was good, but the event was not a pleasant one.

The next day, I spoke to several friends about their restaurants, and they all related similar experiences. One in particular was completely overwhelmed by orders, but only had a skeleton crew (February 9 was a Thursday, normally a very slow pizza night). My friend was sitting close to their telephone and overheard one customer after another calling in to cancel their orders due to the wait time.

There were some common threads in each restaurant:

The restaurant didn’t promote the event.

The restaurant staff didn’t know about the event. Even the restaurants that ran specials didn’t inform their staff.

Not enough staff on hand for the event.

No follow up with customers, especially those who had a poor experience.

So, what can you do for your business to prevent a poor experience for your customers?

1. Look for opportunities to promote your business.

One favorite website for me that really makes it easy to come up with promotions is the National Day Calendar (www.nationaldaycalendar.com). They list over 1500 holidays each year, including daily, weekly, and monthly celebrations. Just a few from March 2017 include:

NOTE: I GUARANTEE if you browse the National Day Calendar listings, you will find an event that ties to your business. (If you can’t find one, call me and I will help you find one!)

2. Get you staff involved
As we learned from National Pizza Day, your staff will be the biggest promoters of your event, but you have to get them involved! Explain the event, what you are expecting (numbers of customers, marketing information collected, products sampled, free or discounted offers, decorations, etc.), and get their ideas.
One lesson I learned was to really listen to input from other generations. Baby Boomers, Gen-X, Millennials, and Gen-Z employees all have very different ideas of how to promote an event. Flyers, social media, direct mail, emails to your customer (and prospect) list. Just listen to your employees, and you will be amazed by their ideas and energy!

3. Promote the event
Take all the input from your employees and put together your promotion plan. Pick out what works, and what is within your budget. Put together a marketing calendar/timeline, and PROMOTE YOUR EVENT! Without action, all your planning is wasted effort.

4. Event Day
Focus your efforts on making this an enjoyable event for your customers and staff. As the business owner or manager, your role should be engaging with your customers. If needed, make each employee responsible for specific tasks during the event.

One key task: collect contact information for every customer, client, or prospect who attended or was involved with the event.

5. Lessons Learned / Event Success
One of the most overlooked parts of any event or celebration is doing a ‘lessons learned’ meeting with your staff that was involved with the event.

After the event, get your staff together and go over the event. You want input FROM YOUR STAFF for each of these items. Your staff were the ones directly interacting with your customers/prospects, and may have a very different experience of the event than you did.

Lessons Learned – What worked well, and what didn’t?

Were flyers a waste of time, or did you run out of them?

Not enough / too much staff?

Did you run out of food / product?

What were your results from each type of social media?

Event Success

Was contact information collected from each customer?

How many people arrived at what times?

How many appointments were generated?

How many ‘free tastes’ were given, and how many sales were generated?

How many gift baskets / promo items were needed for the event?

After you collect this information, THANK YOUR STAFF, and use it to help plan the next event.

6. Follow up with customers
Here’s another area that is often overlooked. Immediately after your event, follow up with EVERY customer or prospect who attended. Thank them for attending and making your event a success, and invite them to return. Be sure to invite them to your next event!

Hampton Roads Accounting works with small businesses, providing accounting, tax, and consulting services. Contact us today with your small business needs.

(Note: Fees charged by Hampton Roads Accounting are about HALF the national average!)

Taxpayers looking to hire a professional to complete their tax return can expect to pay an average of $273 for an itemized Form 1040 with Schedule A and a state tax return, according to the National Society of Accountants (NSA). This is a 4.6 percent increase over the average fee last year, which was $261. It is an 11 percent increase from two years ago – the last time the survey was conducted.

The average cost to prepare a Form 1040 and state return without itemized deductions is $159, also a 4.6 percent increase over the average fee last year, which was $152. It is an 11.2 percent increase from two years ago.

“When you consider the time it takes to complete tax returns, this is a very strong value,” says NSA Executive Vice President John Ams. “The tax code continues to become more complex each year, including some new Affordable Care Act reporting requirements. Professional tax preparers may also be able to find tax deductions and credits that may taxpayers might not notice.”

The survey also reported the average fees for preparing additional Internal Revenue Service (IRS) tax forms, including:

Cleaning homes, apartments, offices and other buildings can indeed be a chore, but one that can be incredibly rewarding, especially when you are paid well to do it.

The tips in this article apply to all cleaning companies and professionals, whether you provide janitorial services, commercial or residential cleaning, window cleaners, pressure/power washers, auto detailing, or any related business. These tips are just as important (if not more so) to a one or two-person operation as they are to a company with dozens of employees.

Self-Employment Tax

If you ever worked for someone else and received a W-2, you and your employer each shared a responsibility for your taxes. The employer withheld a portion from your paycheck, added an employer portion, and submitted them quarterly.

Most cleaning professionals are self-employed. That means you are responsible to report and pay both the employee and employer portions of your taxes on a regular basis. However, since you are in business, you can deduct the employer portion as a business expense.

Vehicle Expenses

Whether you use your personal vehicle for business use or have a separate vehicle just for business, you can deduct expenses related to your vehicle. If you use your own vehicle for both personal use and for business use, you will need to track the business expenses separately.

Parking and Tolls

You can deduct fees and tolls related to your cleaning business. If you have to pay for parking to clean an office or a home, it is a deductible expense.

Bus / Train / Other Public Transportation

If you have to travel by bus, train, taxi, or Uber/Lyft to go from job site to job site, you can deduct the cost of this transportation. Keep all receipts.

While vehicle and transportation expenses will be a significant portion of your expenses, they aren’t the only ones you can deduct:

Advertising

Newspaper ads, flyers, Facebook ads, postcards, imprinted pens, direct mail letters, and other related ways to market your business. Even the costs of setting up a tent/booth at a local home show are deductible if you are advertising your business. The cost of having a logo designed for your company – that’s deductible also.

Insurance

Most cleaners need to have general liability insurance, which is a valid business expense. Don’t claim vehicle insurance – that was already covered by the vehicle expenses.

Phone Service

If you have a separate phone line installed for your business, it is a valid expense. Most people today use their cell phones for business. If it is your personal phone, you will have to separate out the business use from personal use.

I have one client who uses her cell phone for business, and her customers communicate with her by text message. Each month, she prints out her cell phone record and highlights the texts from her customers. This is a great way to document actual business usage of her phone, and good records are needed to substantiate any type of deduction claimed on your tax returns.

Health Insurance

You are in business, and you need health insurance. Your premiums may be deductible if your business makes a profit and you can’t enroll in an employer’s health plan (if you can be claimed on your spouse’s health plan, you can’t claim the deduction.)Employer Portion of Social Security and Medicare

As noted earlier, you are responsible for both the employer and employee portions of employment taxes. The good news is you can deduct the employer portion as a business expense.

Ordinary and Necessary Expenses

Any cleaning company has a lot of ordinary and necessary expenses to keep the operation going. You can claim expenses for:

Wages you pay to employees or helpers

Tools

Machinery

Solvents, rags, gloves, and other supplies

Training and certifications you acquired

Keeping clear records is critical because it’s easy to forget small deductions over time, such as the fuel used to power your pressure washer. Keep receipts for all business-related costs to show the IRS in case you are audited.
You can deduct larger items, like a floor buffer or pressure washer, over time because it is considered a “capital purchase”. You can spread the deduction of a “capital purchase” over the number of years you expect the item to last. For example, if a floor buffer costing $1300 is expected to last five years:

$1300 x 20% = $260. $260 is the deduction you can claim each year for five years.

These are just a few of the many business items a new cleaning business must keep in mind. If you need help in setting up your new business or want to discuss how you can improve your operations, please contact our office.

Getting started in a business is a challenging and exciting time. Many new businesses are set up as a sole proprietorship. This basic form of business entity is very easy to start, requires almost no paperwork, and has the simplest records requirements. It is also the form chosen by many people who have been making money at a hobby, and want to turn their hobby into a real business.

If you are thinking about starting a business as a sole proprietor, take a look at some of the advantages and pitfalls of this business type:

Advantages:

Start up costs are very low.

Income generated by the business is YOUR income.

You control all the functions of your business.

You don’t file separate tax returns for the business – the business information is part of your personal tax return.

You may or may not have employees.

You can sell or close your business at any time. You can even pass it down to your children.

Disadvantages:

Banks are very reluctant to give loans to sole proprietors. See the list of benefits above. Since you can close your doors at any time, you are seen as a business risk.

YOU are personally liable for any debt incurred by your business. If your business is sued or someone gets hurt as a result of your business, your home and personal assets are at risk.

If you die, your business ceases to exist. All assets are liquidated and become part of your estate. Your family could be burdened with large estate or inheritance taxes.

Sole proprietors are four times more likely to be audited than other business forms.

For some businesses, being a sole proprietor makes perfect sense. Bookkeepers, small housekeeping services, tutors and freelance writers come to mind as businesses perfect for the sole proprietor model. For many businesses, other forms could be a better choice.

For new (and existing) business owners in our area, Hampton Roads Accounting meets with prospective clients to discuss their business plans and needs. Together, we can take a look at your business idea, discuss which business form would be best for your situation, and plan your next steps to make your business dream a reality.

There is no cost or obligation for this initial consultation, so give us a call, send us an email, or complete the form on our website to get started. We’ll be in touch right away.

Hampton Roads Accounting focuses on helping small business owners in the following cities: Chesapeake, Virginia Beach, Norfolk, Portsmouth, Suffolk, and the surrounding area.